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TERMINATION AND EMPLOYMENT AGREEMENT AND RELEASE
This Termination and Employment Agreement and Release ("Agreement"), is
made and entered into as of the Effective Date, as defined herein, by and
between John Imle ("Employee"), Union Oil Company of California ("Company") and
Unocal Corporation ("Unocal"). The Company and Unocal are sometimes referred to
herein jointly as "Companies".
WHEREAS, Employee (i) presently serves as a director of each of
Companies, (ii) is Vice Chairman of Unocal, and (iii) is an employee of Company.
WHEREAS, effective as of December 31, 1999, Employee hereby resigns his
positions as a director of the Companies.
NOW, THEREFORE, in consideration of the mutual promises contained in
this Agreement and other valuable consideration, the sufficiency of which is
hereby acknowledged, Companies and Employee agree as follows:
1. Termination of Employment. In the best interests of the Company
and its shareholders, upon execution of this agreement, the
Companies hereby terminate Employee from all of his current
employment-related positions with the Companies, effective as of
December 31, 1999. Employee shall be on vacation from October 15,
1999 through December 31, 1999. Employee shall receive a cash
payment for all accrued but not taken vacation determined as of
January 2, 2000 - such payment, less Applicable Withholding, to
be made by January 15, 2000.
2. Services to be Rendered by Employee On and After Effective Date.
(a) Term of Employment.
Employee shall be employed by the Companies continuously as a
Consulting Employee, commencing January 2, 2000 and continuing
through March 31, 2001. Such employment may be terminated
earlier, provided that such termination shall be exclusively in
accordance with Section 9(2) of this Agreement.
(b) Duties to be Performed.
Employee shall make himself available during regular business
hours at Employee's reasonable convenience to perform telephonic
consultation on matters not involving Confidential Information of
the Companies, provided that such telephonic consultation shall
not be required of Employee at times which interfere with
Employee's ability to conduct employment or business activities
and in any case not more than 80 hours per month. In addition,
Employee shall make himself available during regular business
hours to provide testimony in litigation to which any of the
Companies is a party, but such time shall reduce his obligation
under the preceding sentence (unless Employee is otherwise
compelled by judicial process).
(c) Non-Exclusive Employment.
Employee may, without restrictions as to time, place or nature of
undertaking, perform services for others during the term of
employment described in Section 2(a) as long as such services do
not compromise Employee's obligations under Sections 6 or 7 of
this Agreement or are not with respect to the oil and gas
exploration and production business in a country in which the
Companies are currently conducting significant oil and gas
exploration or production activities or are currently in
negotiations with respect to such activities. Following execution
of this Agreement, and the Effective Date of same, and during the
term of employment described in Section 2(a), Employee agrees to
inform Companies in writing within 10 days of commencing other
employment, consulting assignments or any other position for
which he receives compensation for his services.
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(d) Expense Reimbursement.
Company will reimburse Employee for all reasonable and documented
travel and out-of-pocket expenses incurred by Employee while
traveling on behalf of Company when such travel or expenses have
been authorized by Company.
3. Compensation.
(a) Salary.
During the period January 1, 2000 through December 31, 2000 term
of employment described in Section 2(a), and in consideration of
Employee services as a Consulting Employee and his agreement to
the restrictions on other employment set forth in Section 2(c),
Employee shall receive a salary, payable in semi-monthly
installments, of $525,000 less Applicable Withholding. Employee
shall receive the sum of $65,625 less Applicable Withholding for
the term of employment for January 1, 2001 through March 31,
2001, payable in semi-monthly installments. Employee shall not
accrue any vacation pay for the period of his status as a
Consulting Employee.
(b) Revised Incentive Compensation Plan.
Employee shall receive distribution of the cash portion of
deferred RICP awards made with respect to years prior to 1999 in
accordance with his existing deferral elections on a 100% vested
and non-forfeitable basis. Employee shall receive an RICP award
for calendar year 1999 equal to that which he would have received
had the Companies not terminated his employment under Section 1.
Employee's "target award" 50% (fifty percent) of base annual
salary shall be adjusted only for the Company's performance. With
respect to such adjustments, Employee shall be treated at least
as well as employees at or above his salary grade level. There
shall be no adjustment, neither increase nor decrease for
Employee's individual performance. If the RICP is interpreted,
modified, amended or terminated, or the Management Development
and Compensation Committee ("Committee") thereunder acts, in a
manner which would result in the foregoing award (after having
been rendered in a manner that is non-discriminatory relative to
Employee) being reduced, Employee shall receive a bonus, less
Applicable Withholding, in the amount of such reduction, payable
at the time the RICP award is payable, or would have been
payable.
(c) Long Term Incentive Plans of 1991 and 1998.
(1) Performance Shares.
The parties acknowledge and agree that Employee has been awarded,
under the LTIP, with respect to the Performance Cycles set forth
in Column A below, the number of Performance Shares appearing to
the right of each Performance Cycle in Column B below, and that
under the terms of the LTIP, such Performance Share awards will
be pro-rated as set forth in Column C below, assuming Employee's
employment continues through March 31, 2001:
A. B. C.
Performance Performance Proration
Cycle Share Award Amount
1996-1999 9400 9400
1997-2000 7000 7000
1998-2001 7700 6256
1999-2002 9000 5063
The Companies agree that payout of the above referenced awards
shall be "at the convenience of the Company" for purposes of said
plans and the equivalent section of the Employee's LTIP
agreements. Accordingly, the Companies shall cause the LTIP
Committee to make Performance Share payments to Employee based on
the Awards described in Column B above following the
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close of each Performance Cycle (in the form and at the time such
awards are generally paid) subject only to the following LTIP
variables:
(a) Pro-ration for service under Section 8(d)(I) of the
LTIP shall be as described in Column C above for
termination of employment on March 31, 2001; in the
event of an earlier termination of the term of
employment described in Section 2(a), the date of such
termination shall not be earlier than the Effective
Date and the pro-ration shall be based on the
principles used to derive Column C above.
(b) The original Performance Share award shall be subject
to variation in accordance with Section 8(b) of the
LTIP and the "Peer Group Companies" relative
performance fraction contemplated by the LTIP
agreement.
(c) The price of Stock under the LTIP at the end of the
Performance Cycle.
(d) LTIP Rights Vested; No Further Awards. The termination
of the term of Employee's employment under Section 2 by
reason of Section 8(b) shall not modify Employee's
rights under this Section 3(c). Employee shall not be
eligible for any additional grants under the Long Term
Incentive Plan of 1998 after the Effective Date.
(2) Stock Options.
The parties acknowledge and agree that Employee has been awarded,
under the LTIP, Option Grants dated as set forth in Column A
below, the number of non-qualified stock options appearing to the
right of each Option grant in Column B below, exercisable at the
applicable strike price set forth in Column C below and that
under the terms of the Option Grants, such Option Grants become
exercisable in accordance with the terms increments over the 3
years following the Option Grant date and will therefore be
exercisable in the numbers set forth in Column D below, assuming
Employee's employment continues through March 31, 2001:
A. B. C. D.
Options
Number xercisable
Option of Strike on
Grants Options Price 03/31/2001
01/28/91 16,521 $24.3125 16,521
03/30/92 27,164 $20.9375 27,164
03/29/93 25,466 $29.6875 25,466
03/28/94 30,512 $26.3750 30,512
03/27/95 30,000 $28.5000 30,000
03/25/96 28,600 $32.8125 28,600
03/24/97 29,800 $38.8125 29,800
Companies agree that the exercisable options described in Column
D are vested and non-forfeitable and shall be exercisable by
Employee without restriction until the earlier of (I) the tenth
anniversary of the grant or (ii) the third anniversary of the
termination of the term of Employee's employment under Section
2(a).
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(3) Restricted Shares.
The parties acknowledge and agree that Employee has 14,932 shares
of Restricted Stock resulting from his deferral of a portion of
RICP awards, as of the effective date. Notwithstanding any other
provisions of this Agreement, such Restricted Stock shall be 100%
vested and non-forfeitable, and distributed to Employee without
restriction, on the earlier of the termination of the term of
employment described in Section 2(a) or March 31, 2001.
Notwithstanding any other provisions of this Agreement, such
Restricted Stock shall be 100% vested and non-forfeitable, and
distributed to Employee without restriction, on the earlier of
the termination of the restrictions thereunder or April 6, 2001.
(4) Performance Stock Options.
Employee will continue to "time vest" in his Performance Stock
Options. Employee was granted 400,000 Performance Stock Options
in 1998 and such options will be 100% vested and non-forfeitable
if he remains an employee until March 31, 2001 and will be
subject to pro rata vesting in the event of earlier termination
of employment. The options remain subject to the terms of the
plan, including satisfaction of the performance requirements
necessary for them to become exercisable.
In the event that Employee's Performance Stock Options fail to
become exercisable solely because the performance requirements
necessary for them to become exercisable have not been met, the
Companies shall pay to Employee not later than April 6, 2001 a
lump sum cash settlement amount determined in accordance with the
terms of the Unocal Retirement Plan equal to the benefit accruals
that would have occurred in the aggregate under the Unocal
Retirement Plan and the Non-Qualified Retirement Plans had
Employee continued employment for three (3) additional years
beyond the date of his termination. Said three (3) year period
shall be reduced by the amount of any service recognized by said
plans for the period of January 1, 2001 through March 31, 2001
and using "includable compensation" currently as used in the
Unocal Retirement Plan with respect to Employee as of March 31,
2001. "Includable Compensation" for purposes of the Non-Qualified
Retirement Plan shall not be subject to any Internal Revenue Code
limitations.
(d) Benefits.
(1) Participation After Effective Date.
On and after the Effective Date, and during the term of
Employee's employment under Section 2(a) above, Employee shall be
entitled to participate in all Benefit Plans and fringe benefit
and payroll practices of Unocal on the same terms and conditions
as would be applicable were Employee serving, during the term of
employment described in Section 2(a), in good standing and
receiving as compensation the amounts described in Sections 3(a),
3(b), 3(c) and 3(d) of this Agreement. For purposes of the
preceding sentence, "terms and conditions" includes Employee
making required elections, and Employee's paying generally
applicable employee contributions required by a Benefit Plan to
obtain one or more benefits under the Benefit Plan. If, for any
reason, Employee does not receive, pursuant to a Benefit Plan, at
the time required by such Benefit Plan, all or any portion of the
benefit under such Benefit Plan as contemplated by this Section
3(d), the Companies shall be jointly and severally obligated to
provide the Employee the After Tax Equivalent of the benefit not
then received by the Employee pursuant to the Benefit Plan. The
parties agree that the rights and obligations created under the
preceding sentence are contractual rights and obligations between
Employee and the Companies under the law of California, and not
rights and obligations under a Benefit Plan.
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(a) Without limiting the foregoing Section 3(a)(1), Employee
shall continue to accrue Benefit Service under Unocal's defined
benefit and defined contribution plans under which he is
currently covered. Any amendment to the Unocal Retirement Plan or
any of the Non-Qualified Retirement Plans which would adversely
affect the Employee's benefit thereunder shall be of no force and
effect with respect to the Employee except where such amendment
also adversely affects the benefit with respect to the Company's
most senior executives in a substantially identical manner.
(b) Retiree Health Benefits.
Companies hereby acknowledge and agree that Employee shall
continue to be eligible, during all periods following the
termination of his employment under Section 2(a), to participate
in those Benefit Plans providing post-retirement health benefits
in accordance with the terms thereof as applicable to similarly
situated former employees.
(c) Financial Counseling.
Employee shall remain eligible for financial counseling services
through December 31, 2001.
4. Severance Payment
Employee shall receive payments in accordance with the terms set
forth in Appendix A hereto. The Company's obligations under this
Section 4, as set forth in Appendix A hereto shall survive the
termination of this Agreement, whether pursuant to Section 9
hereof or otherwise. This payment shall be made as early as
practical in the calendar year 2000 following the completion of
the RICP calculation in respect of the 1999 calendar year.
5. Retirement Plans
(a) Qualified Plan. Not later than 30 days following Company's
receipt of all required and properly completed forms, the
Companies shall pay (or cause to be paid) to Employee a lump sum
amount in cash equal to the present value of Employee's accrued
benefit under the Unocal Retirement Plan accrued through March
31, 2001 (assuming Employee's employment through March 31, 2001.)
(b) Non-Qualified Plans. Not later than 30 days following
Company's receipt of all required and properly completed forms,
the Companies shall pay to Employee a lump sum amount in cash
equal to the present value of Employee's accrued benefit under
the Non-Qualified Retirement Plans accrued through March 31, 2001
(assuming Employee's employment through March 31, 2001).
(c) Certain Assumptions. For purposes of calculating the benefits
payable under Sections 5(a) and (b) above, [in addition to the
assumptions set forth on Exhibit A hereto,] the Companies shall
(1) credit Employee with 60 years, 4 months of age and 37 years,
10 months service (provided that if Employee's employment
terminates prior to March 31, 2001 the Companies shall be
entitled to a reduction in such age and service assumptions on a
month-for-month basis), (ii) use Employee's "includible
compensation" in effect as of March 31, 2001, (iii) take into
account any increases in IRC section 415 limits taking effect as
of or prior to March 31, 2001, and (iv) take into account any
changes in the terms of the Unocal Retirement Plan taking effect
as of or prior to March 31, 2001 that would result in a greater
benefit becoming payable to employee, to the extent allowable by
law and applicable regulations.
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6. Confidential Information.
Employee acknowledges that in the course of carrying out his
responsibilities to Companies, he has had fiduciary
responsibilities to Companies and has had access to and has been
entrusted with the confidential and proprietary information and
trade secrets of Companies including, without limitation,
information not previously disclosed to the public regarding
current and projected revenues, expenses, costs, profit margins
and any other financial and budgeting information; marketing and
distribution plans and practices; manufacturing processes,
formulae, methods and facilities; research and development;
business plans, opportunities, projects and any other business
and corporate strategies; product information including reserves,
exploration and research; terms of contracts and other
arrangements with customers suppliers, agents and employees of
Companies; confidential and sensitive information of record
regarding other employees (other than Employee's personal
opinions), including information with respect to their job
descriptions, documented performance strengths and weaknesses,
and compensation; and other information not generally known
regarding the business, affairs and plans of Companies
(collectively, the "Confidential Information"). Employee
acknowledges that the unauthorized use or disclosure of
Confidential Information would be detrimental to Companies and
would reasonably be anticipated to materially impair Companies'
value. Employee acknowledges and agrees that such Confidential
Information is the exclusive property of Companies and that he
shall not at any time, without the prior written consent of an
authorized officer of Unocal either during his employment by
Companies or after the termination of that employment, directly
or indirectly use for himself or others, or disclose to others,
any Confidential Information. The foregoing shall not apply to
information which either (I) is known to Employee other than as a
result of work performed for Companies and from some authorized
source other than Companies, (ii) is or becomes part of the
public domain, other than by Employee's direct or indirect
disclosure, or (iii) consists of explanations of his work
experience that are reasonably necessary to interview for
employment. Employee's obligations under this paragraph shall
survive termination of his employment as described in Section
2(a) for a period of two years from such termination. Employee
represents he has made available to Companies all of his files
and materials taken from his Unocal office, and Companies have
had an opportunity to inspect same, and Companies acknowledge
that such files and materials contain no Confidential
Information.
7. Change of Control.
Employee agrees that during the period commencing on the
Effective Date and ended two years after the termination of
Employee's employment as described in Section 2(a). Employee will
not directly or indirectly participate in or assist any person or
entity in activities designed to effectuate, or reasonably likely
to result in, a change in control of Unocal or other
extraordinary transaction involving Unocal. The foregoing
sentence shall not be interpreted as preventing Employee from
holding a position with an employer where Employee is "walled
off" from any activity prohibited to Employee under this Section.
Without limiting the generality of the preceding sentence,
activities prohibited by this paragraph 7 include activities
designed to effectuate, or reasonably likely to result in (I) a
merger or consolidation involving Unocal, (ii) a sale or other
disposition of all, or a substantial portion of, Unocal's assets,
(iii) any transaction that would require a vote of Unocal's
stockholders under Unocal's Certificate of Incorporation or
bylaws or under applicable law, (iv) any person or entity
(individually or as a group within the meaning of Rule 13d-3
promulgated under the Securities Exchange Act of 1934, as
amended) becoming the beneficial owner of 15% or more of the
combined voting owner of Unocal's then-outstanding equity
securities or (v) a change in the composition of Unocal's Board
of Directors such than, during any period of two consecutive
calendar years, Continuing Directors (as defined below) cease,
for any reason, to constitute at least a majority of the Board of
Directors at the beginning of the applicable two year period
together with new directors whose election by the stockholders
was approved by a vote of at least two-thirds
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of the directors than in office who either were directors at the
beginning of the applicable two-year period or whose election was
previously approved. Employee acknowledges and agrees that in
light of Employee's position and history with Companies and their
affiliates and the circumstances as they exist as of the
Effective Date of this Agreement, it would be impossible for
Employee to engage in any of the activities prohibited by this
paragraph 7 without making use of Confidential Information, and
the prohibitions contained in this paragraph 7 are reasonable.
8. Remedies:
(1) Damages.
The parties agree that the damages according to proof shall be
the remedy at law for breaches hereunder. However, the Companies
shall not be entitled to withhold any payment or portion thereof
provided under Section 3 as an alleged offset against any such
claim of damages by the Companies unless (i) Companies have
submitted the issue to arbitration under Section 8 by written
notice given in accordance with the procedures thereunder on or
before September 14, 1998 and (ii) after a full evidentiary
hearing, the arbitrator determines that the Companies have such a
right of offset as a matter of law and that there has been a
material breach by Employee of Section 7 hereof.
(2) Companies' Equitable Remedies.
Employee acknowledges and agrees that full compliance with his
obligations under Sections 6 or are essential to the Companies,
and in the event of any breach or threatened breach by Employee
of Sections 5 or 6 Companies will sustain losses which are
impossible to determine and not fully compensable by monetary
damages. Therefore, Company and/or Unocal shall be entitled to
institute and prosecute proceedings in any court of competent
jurisdiction to enjoin any such breach or threatened breach and
to enforce the specific performance of such provisions.
(3) Employee's Equitable Remedies.
Companies acknowledge and agree that full compliance with their
obligations under this Agreement are essential to the Employee,
and in the event of any breach or threatened breach by Companies
of this Agreement, Employee will sustain losses which are
impossible to determine and not fully compensable by monetary
damages. Therefore, Employee shall be entitled to institute and
prosecute proceedings in any court of competent jurisdiction to
enjoin any such breach or threatened breach and to enforce the
specific performance of such provisions.
(4) Defense of Validity.
The Companies agree to defend the validity of this Agreement in
any proceeding, which threatens to make this Agreement
unenforceable in any material respect.
9. Termination of Employee.
Employee's employment with the Companies described in Section
2(a) shall terminate only as a result of one of the following
conditions:
(1) The termination of such employment effective March 31, 2001,
pursuant to the first sentence of Section 2(a).
(2) The Employee's material breach of Employee's obligations
under Section 6 or 7 providing services to others contrary to the
requirements of Section 2 (c).
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10. General Release by Employee.
In consideration for this Agreement, Employee hereby releases and
forever discharges Companies and their respective predecessors,
successors, partners, assigns, employees, shareholders, owners,
officers, directors, agents, attorneys, subsidiaries, divisions,
and affiliates (jointly referred to as "Employee's Released
Parties") from any and all claims, demands, causes of action,
obligations, damages, attorneys' fees, costs and liabilities of
any nature whatsoever ("Claims"), whether or not now known,
suspected or asserted, which Employee may have or claim to have
against the Released Parties relating in any manner to Employee'
employment with Companies and/or the termination of such
employment, other than those claims arising by reason of
Employee's rights under this Agreement and Benefit Plans of the
Companies under this Agreement, and hereby covenants not to
assert any such released Claims through a lawsuit, an
administrative proceeding or otherwise. This General Release
includes, but is not limited to, claims arising under federal,
state or local laws prohibiting employment discrimination or
claims arising out of any legal restrictions on Company's rights
to terminate its employees, including without limitation the Age
Discrimination in Employment Act of 1967, Title VII of the Civil
Rights Act of 1964, and the Civil Rights Act of 1991. Except as
specifically provided herein, nothing in this Agreement shall
affect in any way, apply to, increase, or diminish, any rights
which Employee has with respect to benefits under Benefit Plans
that have accrued and vested as of the Effective Date. Nothing in
this Agreement shall affect in any way, apply to, increase or
diminish, any rights which Employee ma have with respect to
coverage by Companies' liability insurance policies, including
directors and officers liability coverages, or Company's or
Unocal's defense or indemnification of Employee during and after
his employment with the Companies, or service as an officer or
director thereof for acts or omissions occurring during the term
of his employment with Company or the term of his service as an
officer or director.
11. General Release by Companies.
In consideration for this Agreement, Companies hereby release and
forever discharge Employee and his successors, heirs, spouse,
executors, insurers, creditors, administrators, devisees,
partners, assigns, employees, shareholders, owners, officers,
directors, agents, financial consultants, attorneys and
affiliates (jointly referred to as "Companies' Released Parties")
from any and all claims, demands, causes of action, obligations,
damages, attorneys' fees, costs and liabilities of any nature
whatsoever ("Company Claims"), whether or not now known,
suspected or asserted, which Companies may have or claim to have
against the Companies' Released Parties relating in any manner to
Employee's employment with Companies and/or the termination of
such employment (other than Company Claims arising under this
Agreement), and hereby covenants not to assert any such released
Company Claims through a lawsuit, an administrative proceeding or
otherwise.
12. Section 1542 Waiver.
Companies and Employee waive all rights under Section 1542 of the
Civil Code of California. That section reads as follows:
"A GENERAL RELEASE DOES NOT EXTEND TO CLAIMS WHICH
THE CREDITOR DOES NOT KNOW OR SUSPECT TO EXIST IN HIS
FAVOR AT THE TIME OF EXECUTING THE RELEASE, WHICH IF
KNOWN BY HIM MUST HAVE MATERIALLY AFFECTED HIS
SETTLEMENT WITH THE DEBTOR."
Notwithstanding the provisions of Section 1542 or any similar law
of any other state, and to provide a full and complete release of
Employee's and Companies' Released Parties as provided in
Sections 9 and 10 hereof, Companies and Employee expressly
acknowledge that Sections 9 and 10 of this Agreement are intended
to release, without limitation, Claims and Company Claims which
Companies or Employee do not know or suspect to exist in their or
his favor at the time of execution of this document, and that the
settlement agreed upon completely extinguishes all such Claims
and Company Claims.
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13. Arbitration.
Except for claims for equitable or injunctive relief, the parties
hereby agree to submit any claim or dispute arising out of the
terms of this Agreement (including exhibits) to private and
confidential arbitration by a single neutral arbitrator. Subject
to the terms of this paragraph, the arbitration proceedings shall
be governed by the Commercial Arbitration Rules of the American
Arbitration Association, and shall take place in Los Angeles
County. The arbitrator shall be appointed by agreement of the
parties hereto or, if no agreement can be reached, by the
American Arbitration Association pursuant to its Rules. The
decision of the arbitrator shall be final and binding on all
parties to this Agreement , and judgment thereon may be entered
in any court having jurisdiction. All costs of the arbitration
proceeding or litigation to enforce this Agreement, including
reasonable attorneys' fees shall be paid to the prevailing party
by the party against whom the arbitrator or court rules. The
parties shall instruct the arbitrator to specify which party is
the prevailing party. Except for claims for equitable or
injunctive relief, this arbitration procedure is intended to be
the exclusive method of resolving any claim relating to the
obligations set forth in this Agreement or otherwise relating in
any way to Employee's employment relationship with Companies.
14. Entire Agreement. This Agreement is a full and complete
expression of the intent of the parties with respect to the
subject matter of this Agreement. No other agreement or
representation, express or implied, has been made by either party
with respect to the subject matter of this Agreement.
15. Amendment. This Agreement may not be modified except by a written
agreement signed by both Employee and by a Vice President of
Unocal.
16. Governing Law. This Agreement shall be governed by, and construed
in accordance with, the laws of the State of California without
reference to the conflicts of law provisions thereof.
17. Severability. In the event any provision of this Agreement shall
finally be determined to be unlawful, such provision shall be
deemed to be severed from this Agreement and every other
provision of this Agreement shall remain in full force and
effect. If any one or more of the provisions of this Agreement
shall for any reason be held to be excessively broad, it shall be
construed, by limiting and reducing it, so as to be enforceable
to the full extent possible under applicable law.
18. Assignment. Employee warrants and represents that he has not
assigned or in any way transferred any right or claim related to
the subject matter of this Agreement and that he will not allow
or assist in such transfer or assignment in the future. Any
purported assignment or transfer shall be deemed void ab initio.
19. No Admission. This Agreement shall not constitute an admission by
any Released Party of any wrongful action or inaction whatsoever.
20. Voluntariness. Employee agrees that this Agreement is understood
by Employee and is voluntarily entered into by the Employee.
21. Beneficiary Designation. Employee may file a written beneficiary
designation for any payments in the event of his death prior to
receipt of the amounts due under this Agreement in the form of
Exhibit A. The last such designation received by Company prior to
his death shall control any such payments.
22. Employee's Right to Review Agreement. Employee has twenty-two
(22) days from the date of Employee's receipt of this Agreement
to consider whether or not to sign this Agreement.
23. Effective Date. This Agreement shall not be effective until eight
(8) days from the date of execution of this Agreement by Employee
(the "Effective Date"). During the seven days following his
execution of this Agreement, Employee may notify Company in
writing of his revocation of this Agreement.
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24. Employee's Right to Consult Counsel. Employee is advised to
consult with Employee's attorney before deciding whether or not
to sign this Agreement.
25. Parties in Interest. Except as expressly provided to the contrary
herein, this Agreement shall be binding upon each successor to,
and assign of, the parties, and inure to the benefit of each
permitted successor to, and assign of, the parties.
26. Waiver. Employee shall not be entitled to any other separation
benefits except as specifically provided in this Agreement.
27. Definitions. Capitalized terms herein shall have the meanings set
forth below.
(a) "After Tax Equivalent" means, with respect to the value of a
benefit under a Benefit Plan that is tax-free or tax
deferred, the amount necessary to replace the value of such
benefit after the tax effect on Employee, assuming a 50%
effective tax rate. For example, if Employee were not able
to receive a tax deferred allocation of $1,000 in a Benefit
Plan that was a defined contribution plan, the After Tax
Equivalent would be $2,000 payable in taxable form to
Employee (on the assumption that at least $1,000 net of
taxes would be generated which Employee could choose to
deposit in a deferred annuity). Similarly, the After Tax
Equivalent of a tax deferred defined benefit future accrual
would be twice the lump sum present value of the accrual at
the time the accrual would otherwise have occurred using
plan actuarial assumptions.
(b) "Applicable Withholding" means the sum of (i) required
Federal, state and local payroll and income tax withholding
and (ii) withholdings for employee-side contributions
pursuant to the terms of Benefit Plans.
(c) "Benefit Plan" means all of the Unocal employee benefit
plans (as defined in Section 3(3) of ERISA), programs or
fringe benefit arrangements or payroll practices in effect
at the Companies on October 14, 1999, any amendment,
modification, restatement or successor to same, and any
other "employee benefit plans" as defined in Section 3(3) of
ERISA or fringe benefit programs established by the
Companies during the term of Employee's employment described
in Section 2(a) in which the Chief Financial Officer of
Unocal is eligible to participate.
(d) "Confidential Information" has the meaning assigned by
Section 5.
(e) "Effective Date" has the meaning assigned by Section 23.
(f) "LTIP" means the Long Term Incentive Compensation Plan
forming a part of the Unocal Management Incentive Program of
1998.
(g) "Non-Qualified Retirement Plans" means the Unocal Retirement
Supplementary Compensation Plan and the Unocal Supplemental
Retirement Plan for Key Management Personnel.
(h) "RICP" means the Revised Incentive Compensation Plan forming
a part of the Unocal Corporation Management Incentive
Program.
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IN WITNESS WHEREOF, this Agreement has been executed in duplicate
originals.
UNION OIL COMPANY OF EMPLOYEE
CALIFORNIA
By: Dennis Codon ss By: J. F. Imle ss
----------------------
V.P.& Chief Legal Officer
Dennis Codon J. F. Imle
------------------ ----------------
Print Name Print Name
9/3/99 9/3/99
----------------- ----------------
Date Date
September 3, 1999
UNOCAL CORPORATION
By: Dennis Codon ss
--------------------------
V.P. & Chief Legal Officer
Dennis Codon
------------------
Print Name
9/3/99
------------------
Date
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APPENDIX A
A. Employee's benefits under Section 4 of the Agreement shall be a lump sum
equal to the sum of the following:
(1) $1,575,000 (One Million Five Hundred and Seventy-Five Thousand
Dollars), plus
(2) $75,000 (Seventy-Five Thousand Dollars), plus
(3) The sum of Employee's Revised Incentive Plan Awards for calendar years
1998 and 1999 multiplied by 1.5 (one and one-half).plus
(4) An amount equal to $94,500
B. The above payment shall be considered full satisfaction of all rights,
benefits and payments under Employee's Unocal Employment Agreement dated
July 28, 1998.
C. Employee shall not be obligated to seek other employment or take any other
action by way of mitigation of the amounts payable to Employee under any
provisions of this Agreement.
D. Certain Additional Payments by the Company may be due as follows:
(1) In the event it shall be determined that any payment or distribution
by the Company or its affiliates to or for the benefit of Employee
(whether paid or payable or distributed or distributable pursuant to
the terms of this Agreement or otherwise but determined without regard
to any additional payments required under this Agreement), (a
"Payment") would be subject to the excise tax imposed by Section 4999
of the Internal Revenue Code of 1986, as amended (the "Code") or any
interest or penalties are incurred by Employee with respect to such
excise tax (such excise tax, together with any such interest and
penalties, are hereinafter collectively referred to as the "Excise
Tax"), then Employee shall be entitled to receive an additional
payment (a "Gross-Up Payment") in an amount such that after payment by
Employee of all taxes (including any interest or penalties imposed
with respect such taxes), including, without limitation, any income
taxes (and any interest and penalties imposed with respect thereto)
and Excise Tax imposed upon the Gross-Up Payment, Employee retains an
amount of the Gross-Up Payment equal to the Excise Tax imposed upon
the Payments. Notwithstanding the foregoing provisions of this
Paragraph D(1), if it shall be determined that Employee is entitled to
a Gross-Up Payment, but that the Payments do not exceed 110% of the
greatest amount (the "Reduced Amount") that could be paid to Employee
such that the receipt of payments would not give rise to any Excise
Tax, then no Gross-Up Payment shall be made to Employee and the
Payments, in the aggregate, shall be reduced to the Reduced Amount.
(2) Subject to the provisions of Paragraph D(3), all determinations
required to the made under this Paragraph D, including whether and
when a Gross-Up Payment is required and the amount of such Gross-Up
Payment and the assumptions to be utilized in arriving at such
determination, shall be made by Ernst and Young or such other
certified public accounting firm as may be designated by Employee (the
"Accounting Firm") which shall provide detailed supporting
calculations both to the Company and Employee within 15 business days
of the receipt of notice from Employee that there has been a Payment,
or such earlier time as is requested by the Company. In the event that
the Accounting Firm is serving as accountant or auditor for the
individual, entity or group effecting the Change of Control, Employee
shall appoint another nationally recognized accounting firm to make
the determinations required (which accounting firm shall then be
referred to as the Accounting Firm hereunder). All fees and expenses
of the Accounting Firm shall be borne solely by the Company. Any
Gross-Up Payment, as determined pursuant to this Paragraph D, shall be
paid by the Company to Employee within five days of the receipt of the
Accounting Firm's determination. Any determination by the Accounting
firm shall be binding upon the Company and Employee. As a result of
the uncertainty in the application of Section 4999 of the Code at the
time of the initial determination by the Accounting Firm hereunder, it
is possible that Gross-Up Payments which will
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not have been made by the Company should have been made
("Underpayment"), consistent with the calculations required to be made
hereunder. In the event that the Company exhausts itsremedies pursuant
to Paragraph D(3) and Employee thereafter is required to make a
payment of any Excise Tax, the Accounting Firm shall determine the
amount of the Underpayment that has occurred and any such Underpayment
shall be promptly paid by the Company to or for the benefit of
Employee.
(3) Employee shall notify the Company in writing of any claim by the
Internal Revenue Service that, if successful, would require the
payment by the Company of the Gross-Up Payment. Such notification
shall be given as soon as practicable but no later than 10 business
days after Employee is informed in writing of such claim and shall
apprise the Company of the nature of such claim and the date on which
such claims is requested to be paid. The Employee shall not pay such
claim prior to the expiration of the 30-day period following the date
on which it gives such notice to the Company (or such shorter period
ending on the date that any payment of taxes with respect to such
claim is due). If the Company notifies Employee in writing prior to
the expiration of such period that it desires to contest such claim,
Employee shall:
(i) give the Company any information reasonably requested by the
Company relating t such claim;
(ii) take such action in connection with contesting such claim as the
Company shall reasonably request in writing from time to time,
including, without limitation, accepting legal representation
with respect to such claim by an attorney reasonably selected by
the Company;
(iii)cooperate with the Company in good faith in order effectively to
contest such claim; and
(iv) permit the Company to participate in any proceedings relating to
such claim;
provided, however, that the Company shall bear and pay directly all
costs and expenses (including additional interest and penalties)
incurred in connection with such contest and shall indemnify and hold
Employee harmless, on an after-tax basis, for any Excise Tax or income
tax (including interest and penalties with respect thereto) imposed as
a result of such representations and payment of costs and expenses.
Without limitation on the foregoing provisions of this Paragraph D(3),
the Company shall control all proceedings taken in connection with
such contest and, at its sole option, may pursue or forego any and all
administrative appeals, proceedings, hearings and conferences with the
taxing authority in respect of such claim and may, at its sole option,
either direct Employee to pay the tax claimed and sue for a refund or
contest the claim in any permissible manner, and Employee agrees to
prosecute such contest to a determination before any administrative
tribunal, in a court of initial jurisdiction and in one or more
appellate courts, as the Company shall determine; provided, however,
that if the Company directs Employee to pay such claim and sue for a
refund, the Company shall advance the amount of such payment to
Employee, on an interest-free basis and shall indemnify and hold
Employee harmless, on an after-tax basis, from any Excise Tax or
income tax (including interest or penalties with respect thereto)
imposed with respect to the such advance or with respect to any
imputed income with respect to taxes for the taxable year of Employee
with respect to which such contested amount is claimed to be due is
limited solely to such contested amount. Furthermore, the Company's
control of the contest shall be limited to issues with respect to
which a Gross-Up payment would be payable hereunder and Employee shall
be entitled to settle or contest, as the case may be, any other issue
raised by the Internal Revenue Service or any other taxing authority.
(4) If, after the receipt by Employee of an amount advanced by the Company
pursuant to Paragraph D(3), Employee becomes entitled to receive any
refund with respect to such claim, Employee shall (subject to the
Company's employing with the requirements of Paragraph D) promptly pay
to the Company the amount of such refund (together with any interest
paid or credited thereon after taxes applicable thereto). If, after
the receipt by Employee of an amount advanced by the Company with
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respect to such claim and the Company does not notify Employee in
writing of its intent to contest such denial of refund prior to the
expiration of 30 days after such determination, then such advance
shall be forgiven and shall not be required to be repaid and the
amount of such advance shall offset, to the extent thereof, the amount
of Gross-Up Payment required to be paid.
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